Hahnel v. Duchesne Land, LC ( 2013 )

2013 UT App 150_________________________________________________________
THE UTAH COURT OF APPEALS
MAGNA G. HAHNEL, CHERYL PIETZ, AND
CAROL J. STEWART,
Plaintiffs and Appellants,
v.
DUCHESNE LAND, LC AND
HIGHLAND DEVELOPMENT, INC.,
Defendants and Appellees.
Opinion
No. 20111098‐CA
Filed June 20, 2013
Third District, Salt Lake Department
The Honorable Kate A. Toomey
No. 090921035
Russell C. Fericks, Zachary E. Peterson, and
Rafael A. Seminario, Attorneys for Appellants
David J. Crapo, Douglas C. Smith, and
John T. Deeds, Attorneys for Appellees
JUDGE CAROLYN B. MCHUGH authored this Opinion, in which
JUDGES GREGORY K. ORME and STEPHEN L. ROTH concurred.
McHUGH, Judge:
¶1 Magna G. Hahnel, Cheryl Pietz, and Carol J. Stewart
(collectively, Buyers) appeal the trial court’s entry of summary
judgment and award of attorney fees in favor of Duchesne
Land, LC and Highland Development, Inc. (collectively, Sellers).
We affirm.
Hahnel v. Duchesne Land
BACKGROUND
¶2 In March 2004, Buyers purchased a lot with an option to
build a cabin in Duchesne County, Utah. The transaction was
memorialized in two contracts: an agreement for the purchase of
the lot between Buyers and Duchesne Land (the Land Purchase
Agreement) and a building sales contract between Buyers and
Highland Development (the Building Contract). Due to
unanticipated delays, Sellers offered to exchange Buyers’ lot for a
more valuable lot at no additional charge. Buyers accepted the
offer, and the lot exchange was memorialized in a third agreement
(the Exchange Agreement) that states, “Highland Development,
Inc. has a projected completion date of cabin construction Sept. 30,
2004. However, Highland Development, Inc. will make every effort
to have the cabin completed by Labor Day.” The Exchange
Agreement did not contain a provision indicating that time was of
the essence.
¶3 Thereafter, Buyers obtained a construction loan for the cost
of building the cabin and pledged the lot as security. During
construction, a dispute arose between Sellers and Duchesne
County that resulted in the cabin not being completed by
September 2004. In addition, Buyers gave Sellers a punch list of
items they claimed needed attention on three separate occasions
between February and May 2005.
¶4 Sellers eventually completed the cabin, and Buyers received
a permanent certificate of occupancy on June 3, 2005. Shortly
thereafter, a painter informed Buyers that the cabin was infested
with mold. Buyers notified Sellers of the problem and offered to
sell them the cabin for $113,000. In response, Sellers offered to take
the cabin and to refund $85,518.90, which they claimed was the
sum of all amounts paid by Buyers to date. When Buyers refused,
Sellers hired a contractor to remediate the mold. Buyers sought and
were granted several extensions of their construction loan.
20111098‐CA 2 2013 UT App 150Hahnel v. Duchesne Land
¶5 On September 12, 2005, Buyers sued Sellers, claiming that
they had breached the Building Contract by (1) not completing it
on time, (2) failing to rectify the punch‐list items, and (3) delivering
a cabin infested with mold.1 After filing the complaint, Buyers
made no further effort to keep the construction loan current or to
obtain permanent financing. On November 10, 2005, the
construction lender notified Buyers that the loan was in default and
that the lender intended to initiate foreclosure proceedings. Buyers
did not bring the loan current, and the cabin and lot were sold at a
foreclosure sale on April 11, 2006.
¶6 Approximately two years later, Sellers filed a motion for
summary judgment arguing that the damages Buyers sought were
not recoverable and that Buyers were not entitled to attorney fees.
In particular, Sellers argued that Buyers failed to mitigate their
damages when they refused to obtain long‐term financing to satisfy
the construction loan, which they were capable of obtaining, and
thereby failed to protect the property from foreclosure. Sellers also
argued that the only attorney fees provision at issue was
specifically limited to the Land Purchase Agreement, which had
been fully performed. That provision states, “Buyer[s] shall pay all
costs and expenses, including attorney’s fees, incurred by Seller[s]
in the enforcement of the terms of this agreement and/or the Trust
Deed, whether or not a legal suit is brought by Seller[s] in
connection therewith.”
¶7 In response, Buyers disputed Sellers’ claim that Buyers had
forfeited their right to damages by failing to mitigate, asserting that
they were entitled to recover their down payment and the equity
in the lot and cabin. Buyers also claimed that the Land Purchase
Agreement and the Building Contract were part of a single
agreement and that the attorney fees provision was applicable to
1. Buyers also alleged seven fraud claims but voluntarily dismissed
those claims in response to a motion for summary judgment Sellers
filed in July 2006.
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both. Although the express terms of the provision afforded only
Sellers the right to recover their attorney fees, Buyers argued that
they were also entitled to recover attorney fees pursuant to Utah
Code section 78B‐5‐826 (the Reciprocal Fee Statute). See Utah Code
Ann. § 78B‐5‐826 (LexisNexis 2012)2 (“A court may award . . .
attorney fees to either party that prevails in a civil action based
upon any . . . written contract . . . when the provisions of the . . .
written contract . . . allow at least one party to recover attorney
fees.”).
¶8 On August 11, 2008, the trial court issued a ruling and order
agreeing with Sellers that Buyers had not mitigated their damages
and therefore concluded that Buyers could not recover the loss of
their down payment or the loss of their equity in the project.
However, the trial court adopted Buyers’ position with respect to
attorney fees, determining that the Land Purchase Agreement and
the Building Contract were an integrated agreement and that the
attorney fees provision applied to both. In addition, it concluded
that under the Reciprocal Fee Statute, Buyers were “entitled to
attorney fees as a matter of law . . . on matters which they recover
damages for.”
¶9 After a four‐day trial on Buyers’ remaining claims, the jury
determined that Sellers had not breached the contract. As a result,
the jury never reached the issue of damages. Sellers then moved for
an award of attorney fees. Buyers opposed the motion, arguing that
the attorney fees provision was of limited scope and did not entitle
Sellers to an award simply because they were the prevailing party.
The trial court disagreed, stating that because it had ruled in its
earlier order that Buyers were eligible for attorney fees under the
Reciprocal Fee Statute, Sellers were necessarily entitled to an award
of attorney fees incurred in successfully defending against Buyers’
2. Because there have been no substantive changes to the relevant
sections of the Utah Code, we cite the current version for the
convenience of the reader.
20111098‐CA 4 2013 UT App 150Hahnel v. Duchesne Land
claims. After the trial court denied their motion for reconsideration,
Buyers filed a timely appeal.
ISSUES AND STANDARDS OF REVIEW
¶10 Buyers first challenge the trial court’s grant of summary
judgment in favor of Sellers on damages. They argue that the
erroneous ruling limited the damages evidence that Buyers could
present to the jury, thereby impacting the jury’s decision on
liability. “When determining the propriety of a trial court’s grant
of summary judgment, we review the trial court’s legal conclusions
for correctness, affording those conclusions no deference.” Joseph
v. McCann, 2006 UT App 459, ¶ 9, 147 P.3d 547 (citation and
internal quotation marks omitted).
¶11 Buyers next challenge the trial court’s award of attorney fees
and costs to Sellers, arguing that the terms of the attorney fees
provision do not apply to Sellers’ successful defense of the breach
of contract claims. “Whether attorney fees are recoverable in an
action is a question of law, which we review for correctness.”
Valcarce v. Fitzgerald, 961 P.2d 305, 315 (Utah 1998).
ANALYSIS
I. Buyers’ Damages Claim is Moot.
¶12 We begin our analysis with Buyers’ claim that the trial court
erred in limiting the damages they could request at trial.
Specifically, Buyers argue that they were denied the right to a full
and fair presentation to the jury because evidence of greater
damages could have swayed the jury’s determination of whether
Sellers had breached the Building Contract. In response, Sellers
contend that this issue is moot due to the jury’s determination that
Sellers did not breach either contract.
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¶13 “An issue is moot when resolution of it cannot affect the
rights of the parties.” Cox v. Cox, 2012 UT App 225, ¶ 21, 285 P.3d
791. Because the jury concluded that Sellers had not breached
either agreement, any decision about the damages that would have
been available had the jury concluded otherwise could have no
legal effect on the rights of the parties and is therefore moot. Cf.
Jensen v. IHC Hosps., Inc., 2003 UT 51, ¶ 146, 82 P.3d 1076 (“The jury
found no negligence by [defendant]. Without a finding of
negligence, plaintiffs lack the requisite predicate for their
fraudulent concealment claim because there was nothing to
conceal. Hence, the jury’s verdict rendered plaintiffs’ fraudulent
concealment claim moot.”); Nelson v. Peterson, 542 P.2d 1075, 1077
(Utah 1975) (“The question of damages is moot since the jury found
by general verdict for each defendant, which under the instructions
of the court showed that neither defendant was negligent.”); Alarid
v. American Appliance Mfg., Inc., 2002 UT App 376U, para. 4 (mem.)
(“Appellant’s arguments regarding Mr. Long’s testimony are . . .
moot because his testimony went to causation, an issue not reached
by the jury because the jurors found no defect in the water heaters’
design.”).
¶14 Nor are we persuaded by Buyers’ argument that evidence
of greater damages was relevant to the liability determination.
Essentially, Buyers claim that the jury might have found Sellers in
breach if Buyers’ injury had been greater. Whether there was a
breach is an independent inquiry separate from the issue of
damages. The jury was instructed to decide whether Sellers
breached the Building Contract based on its terms and the evidence
related to performance. Only if the jury found Sellers in breach was
it to consider the extent to which that breach damaged Buyers. We
presume that the jury understood and followed these instructions.
See generally State v. Nelson, 2011 UT App 107, ¶ 4, 253 P.3d 1094(“In the absence of the appearance of something persuasive to the
contrary, we assume that the jurors were conscientious in
performing . . . their duty, and that they followed the instructions
of the court.” (citation and internal quotation marks omitted)).
Accordingly, the issue of whether the trial court erred in granting
20111098‐CA 6 2013 UT App 150Hahnel v. Duchesne Land
partial summary judgment on the failure to mitigate damages is
moot and we will not consider it. See In re Adoption of L.O., 2012 UT
23, ¶ 8, 282 P.3d 977.
II. Sellers Were Enforcing the Building Contract and Are Entitled
to Attorney Fees.
¶15 The attorney fees provision states, “Buyer[s] shall pay all
costs and expenses, including attorney’s fees, incurred by Seller[s]
in the enforcement of the terms of this agreement and/or the Trust
Deed, whether or not a legal suit is brought by Seller[s] in
connection therewith.” Buyers contend that because Sellers did not
advance any counterclaims or affirmative defenses, they did not
incur any attorney fees “in the enforcement of the terms” of the
Building Contract. Sellers respond that by proving no breach had
occurred, they were enforcing the terms of the Building Contract.3
¶16 “As a general rule, attorney fees are recoverable only if
authorized by contract or statute.” Anderson & Karrenberg v.
Warnick, 2012 UT App 275, ¶ 9, 289 P.3d 600. “If the legal right to
attorney fees is established by contract, Utah law clearly requires
the court to apply the contractual attorney fee provision and to do
so strictly in accordance with the contract’s terms.” Jones v. Riche,
2009 UT App 196, ¶ 2, 216 P.3d 357 (mem.). “Under basic rules of
contract interpretation, [we] first look to the writing alone to
determine its meaning and the intent of the contracting parties.”
Giusti v. Sterling Wentworth Corp., 2009 UT 2, ¶ 44, 201 P.3d 966. “If
the language within the four corners of the contract is
unambiguous, the parties’ intentions are determined from the plain
meaning of the contractual language, and the contract may be
3. Although both parties also brief the impact of the Reciprocal Fee
Statute on this question, Sellers are expressly covered by the
attorney fees provision itself. Therefore, we agree with the trial
court’s statement that “the focus on the [Reciprocal Fee Statute]
here is a red herring and an unnecessary step in the analysis.”
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interpreted as a matter of law.” Id. (citation and internal quotation
marks omitted).
¶17 In support of their argument that a purely defensive effort
does not justify an award of attorney fees, Buyers point to our
decision in Carr v. Enoch Smith Co., 781 P.2d 1292 (Utah Ct. App.
1989). There, Carr agreed to purchase a home to be built by Smith,
“‘[s]ubject to [Carr] receiving a primary residence loan.’” Id. at
1293. When Carr had not made any serious effort to obtain a loan
after a year, Smith revised the construction plans to make the home
suitable for use as a model and returned Carr’s earnest money
payment. Id. Carr later sued Smith for specific performance. Id. The
trial court ruled that Smith was excused from performing based on
Carr’s failure to obtain financing within a reasonable time and,
after determining that the attorney fee provision was ambiguous,
awarded Smith attorney fees based on the parties’ stipulation that
the prevailing party would be awarded costs and fees. Id. at
1293–94. On appeal, this court affirmed the decision on specific
performance but reversed the award of attorney fees. Id. at 1294–96.
The attorney fees provision there provided, “‘If either party fails [to
perform], he agrees to pay all expenses of enforcing this agreement,
or of any right arising out of the breach thereof, including a
reasonable attorney’s fee.’” Id. at 1296 (emphasis omitted)
(alteration in original). We noted that the provision provided “that
either [Carr] or [Smith] would recover its fees if it successfully sued
to enforce the contract, while both [Carr] and [Smith] would be left
to absorb their own fees if instead one party merely resisted
successfully an action to enforce the contract brought by the other
party.” Id. at 1296 n.5 (emphasis omitted). We further explained,
Smith took an entirely defensive posture. It was not
enforcing any right arising under the agreement or
arising from a breach thereof. On the contrary, its
position at trial was that there was no viable contract
left to enforce. While Smith would surely be entitled
to attorney fees under the more typical provision
20111098‐CA 8 2013 UT App 150Hahnel v. Duchesne Land
awarding fees to the prevailing party, it is not
entitled to attorney fees under the provision at issue.
Id. at 1296 (citation omitted).
¶18 Here, Buyers argue that since Carr, Utah courts have
construed attorney fees provisions tied to “enforcement” of a
contract as more limited in scope than provisions that award
attorney fees to the prevailing party. However, each of the
decisions relied upon by Buyers, like Carr, involved an attorney
fees provision that required a default or failure to perform. See
Faulkner v. Farnsworth, 714 P.2d 1149, 1151 (Utah 1986) (per curiam)
(“The contractual language does not award attorney fees to the
prevailing party who succeeds in enforcing the agreement, but
against the defaulting party whose default necessitates
enforcement. As neither party was held in default, neither was
entitled to attorney fees.”); B. Inv. LC v. Anderson, 2012 UT App 24,
¶¶ 31–34, 270 P.3d 548 (declining to award attorney fees to
defendant who “prevailed in the trial court, but [who] did not
demonstrate that the [plaintiff] violated any provision” of the
contract because the attorney fee provision was triggered by a
“failure to comply with any of the provisions”); Maynard v.
Wharton, 912 P.2d 446, 451–52 (Utah Ct. App. 1996) (holding that
where an attorney fees provision requires the defaulting party to
pay attorney fees and the sellers do not establish any default by the
buyers, the provision “does not contemplate an award of attorney
fees for sellers just because buyers sued”). While we agree that the
fee provision at issue in this case does not award fees to the
prevailing party, it likewise does not require a finding that the
other party is in default or has failed to perform. See Carr, 781 P.2d
at 1296; see also Faulkner, 714 P.2d at 1151; B. Inv., 2012 UT App 24,
¶¶ 31–34; Maynard, 912 P.2d at 451–52.
¶19 The attorney fee provision in the Land Purchase Agreement
explicitly requires Buyers to pay for attorney fees and costs that are
incurred by Sellers “in the enforcement of the terms of this
agreement” and does so “whether or not a legal suit is brought by
20111098‐CA 9 2013 UT App 150Hahnel v. Duchesne Land
Seller[s] in connection therewith.” Based on that language, Sellers
argue that the fee provision was triggered because the action was
brought by Buyers to enforce their interpretation of the terms of the
Building Contract and Sellers defended by asserting a contrary
interpretation, even though “legal suit [was not] brought by
Seller[s].”
¶20 Although the parties have pointed us to no Utah appellate
decision that has addressed this precise question, other
jurisdictions have considered similar issues. In Aspen Services, Inc.
v. IT Corp., 583 N.W.2d 849 (Wis. Ct. App. 1998), the Court of
Appeals of Wisconsin considered whether a lessor was entitled to
attorney fees under an attorney fee provision in a lease for
successfully defending against a lessee’s counterclaims. Id. at
850–51. The attorney fee provision provided, “‘Lessee shall pay all
costs, expenses and reasonable attorney fees that may be incurred
or paid by Lessor in enforcing the covenants and agreements of this
Lease.’” Id. at 850. The Aspen court concluded that when the lessor
defended against the lessee’s counterclaims, the lessor was
“enforcing” the agreements of the lease. Id. at 851. Accordingly, the
court determined that the lessor was entitled to recover its attorney
fees associated with defending against the lessee’s counterclaims.
Id.; see also Evergreen Cmty. Power LLC v. Riggs Distler & Co., Inc.,
No. 10‐728, 2012 WL 1657742, at *5 (E.D. Pa. May 11, 2012) (“[I]t
seems reasonable that the parties’ contract should be construed to
provide [plaintiff] with attorney’s fees for its defense of
[defendant’s] various counterclaims. Through its effective defense
[of counterclaims], [plaintiff] enforced its right to pay [defendant]
only what was owed.”), aff’d, Nos. 12‐2365, 12‐2423, 2013 WL
500731 (3d Cir. Feb. 12, 2013). An Indiana appellate court reached
a similar conclusion in Gerstbauer v. Styers, 898 N.E.2d 369 (Ind. Ct.
App. 2008). There, the court determined that an attorney fee
provision, which stated, “‘Each party shall pay the other party’s
reasonable legal costs and attorney’s fees incurred in successfully
enforcing against the other party any covenant, term or condition
20111098‐CA 10 2013 UT App 150Hahnel v. Duchesne Land
of this Lease,’” entitled the lessor to recover reasonable attorney
fees incurred in defending against the lessee’s claims. Id. at 379. The
Gerstbauer court reasoned, “In defending himself against [the
lessee’s] action, [the lessor] relied upon—and sought to have the
trial court give effect to—the provision of the lease that permitted
him to retain [the lessee’s] property in the event of [the lessee’s]
default.” Id. at 380.
¶21 A similar approach is appropriate here. By defending
against Buyers’ claims for breach of contract, Sellers were enforcing
their interpretation of the terms of, and defending their right to
retain the amounts paid by Buyers under, the Building Contract. To
prove that there was no breach of the Building Contract despite
Buyers’ claim that the cabin was not completed on time, that the
punch‐list items were never completed, or that there was mold in
the cabin that would justify a damages award to Buyers, Sellers
had to establish that they had complied with the terms of the
Building Contract. Accordingly, Sellers were engaged in an
“enforcement of the terms of” the Building Contract as they
interpreted them when they successfully defended against Buyers’
claims that a breach had occurred. Therefore, Sellers were entitled
to recover their attorney fees pursuant to the express language of
the attorney fees provision.
III. Sellers Are Entitled to Attorney Fees on Appeal.
¶22 Last, Sellers request attorney fees on appeal. Because they
were entitled to attorney fees in the trial court, Sellers may also
recover their reasonable fees incurred on appeal. See generally
Valcarce v. Fitzgerald, 961 P.2d 305, 319 (Utah 1998) (“[W]hen a party
who received attorney fees below prevails on appeal, the party is
also entitled to fees reasonably incurred on appeal.” (citation and
internal quotation marks omitted)). We remand to the trial court
for a determination of the appropriate amount of attorney fees and
costs incurred on appeal to be awarded to Sellers.
20111098‐CA 11 2013 UT App 150Hahnel v. Duchesne Land
CONCLUSION
¶23 The challenge to the trial court’s summary judgment
limiting Buyers’ damages is moot because the jury found that
Sellers had not breached the contract. By enforcing the terms of the
Building Contract, Sellers were entitled to attorney fees pursuant
to the attorney fee provision in the parties’ agreement. Sellers are
also entitled to attorney fees reasonably incurred on appeal, and we
remand to the trial court for a determination of that amount.
¶24 Affirmed.
20111098‐CA 12 2013 UT App 150